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1975 Supreme(Mad) 187
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE V RAMASWAMY & THE HONOURABLE MR. JUSTICE V SETHURAMAN
Monoranjan Ganguli and Sons Private Limited - Appellant
Versus
Secretary To Government - Respondent
Case No : TC No. 121 of 1970
Decided On : 17 March 1975
An amount received by a dealer as a deposit in order to enable enforcement of an indemnity executed by the purchaser without resorting to any legal proceedings or otherwise, cannot be said to be a collection of sales tax.
Headnote:
PONDICHERRY GENERAL SALES TAX ACT - EXEMPTION - NOTIFICATION - INTERPRETATION - COLLECTION OF TAX - DEPOSIT - REFUND - RETROSPECTIVE EFFECT - VALIDITY.
Fact of the Case:
The appellant, a private limited company dealing in automobiles and spare parts, claimed exemption from sales tax for two transactions of sale made during the period when there was no General Sales Tax Act in force in Pondicherry. The assessing authority rejected the claim, holding that the appellant had collected sales tax in one case and had shown it in the bill in the other case. The AAC allowed the exemption, holding that the amount was received only as a deposit and not as a tax. The Secretary to Government, Finance Department, upheld the order of the AAC in respect of the second transaction but held that the first transaction was liable to be included in the taxable turnover.
Finding of the Court:
The court held that the amount received by the appellant in respect of the first transaction was only a deposit and not a collection of sales tax. The court relied on the fact that the amount was refunded later on, and that the appellant had obtained a letter of indemnity from the purchaser. The court also distinguished the decision in Kassam & Co. vs. State of Madras, which was relied on by the Secretary to Government, on the ground that in that case the waiver was not made in exercise of any statutory power.
Issues: Whether the amount received by the appellant in respect of the first transaction was a collection of sales tax or only a deposit.
Ratio Decidendi: The court held that the amount received by the appellant in respect of the first transaction was only a deposit and not a collection of sales tax. The court relied on the fact that the amount was refunded later on, and that the appellant had obtained a letter of indemnity from the purchaser. The court also distinguished the decision in Kassam & Co. vs. State of Madras, which was relied on by the Secretary to Government, on the ground that in that case the waiver was not made in exercise of any statutory power.
Final Decision: The court allowed the appeal and set aside the order of the Secretary to Government, Finance Department.
V. RAMASWAMI, J.
This is an appeal under S. 41 of the Pondicherry General ST Act (Act 6 of 1967), against the order of the Secretary to Government, Finance Department, Pondicherry, made under S. 37 of that Act. The appellant is a private limited company carrying on business as dealer in auto mobile and spare parts at Pondicherry. For the asst. yr. 1966-67 the appellant reported a total and taxable turnover of Rs. 7, 53, 199.58 and Rs. 5, 50, 275.17 respectively. Before the Joint commercial Tax Officer, who was the assessing authority, the appellant claimed exemption in respect of a turnover of Rs. 33, 862, 82 representing two transactions of sale made on 2nd March, 1967 and 25th March, 1967. Though the assessing authority held that these transactions were not exempt and liable to sales-tax. The facts necessary for the claim of this exemption may now be noted.
2. The validity of Pondicherry General ST Act (Act 10 of 1965), which came into force on 1st April, 1966, was questioned before the Supreme Court and by its judgment in Sham Rao vs. Union Territory of Pondicherry dt. 20th February, 1967, the Supreme Court held that the Act was ultra vires of the powers of the Pondicherry Legislature. Thereafter the Legislature passed the Pondicherry General ST Act (Act 6 of 1967), and this received the assent of the President of India on 2nd November, 1967 and it was published in the Pondicherry Gazette on 21st November, 1967. Sec. 3 provided that the Act shall have retrospective effect from 1st April, 1966. As seen from these facts, from 20th February, 1967 to 20th November, 1967 there was no General ST Act in force. The two transactions of sale of two fiat cars took place in between these two dates on 2nd March, 1967 and 25th March, 1967. In respect of the first transaction of sale, in the sale bill the appellant after totalling the price of the vehicle as Rs. 16, 896, 96 added under the head "Sales tax deposit" Rs. 1, 689.70. On the same date it obtained what is styled as a letter of indemnity from the purchaser under which he had agreed that in case the Pondicherry Government demands from the seller at a later date sales-tax on the said transaction the purchaser shall pay the amounts immediately on demand. Later on 24th May, 1968 the appellant in fact refunded the amount collected as sales-tax deposit to the purchaser. In the second transaction dt. 25th March, 1967, though the bill is similarly prepared and the amount was shown as sales-tax deposit, the purchaser had not paid that money and he had simply executed the letter of indemnity as in the other case agreeing to pay sales-tax in case the Pondicherry Government demanded at a later stage.
3. After the Pondicherry General ST Act (Act 6 of 1967) was published, the Government of Pondicherry issued a notification on 21st November, 1967 which read as follows :
"In exercise of the powers conferred by sub-s. (1) of S. 19 of the Pondicherry General ST Act (Act 6 of 1967), the Lieutenant Governor, Pondicherry, is pleased to exempt the levy of tax under the provisions of the said Act in respect of every purchase and every sale effected by any dealer during the period commencing from 20th February, 1967 to 19th November, 1967, if the Dealer proves to the satisfaction of the assessing authority that he had not collected any tax in respect of such purchase or sale." *
The assessee claimed that by virtue of this notification these two transactions of sales were not liable to be included in the taxable turnover of assessee. This claim was rejected by the assessing authority on the ground that in one case the assessee had actually collected the tax and in the other case it had shown the sales-tax in the bill itself and obtained an indemnity. The AAC, on the other hand, held that the amount as received only as a deposit and not as a tax and that it was also in fact refunded later on in the first case and no tax was collected at all in the later case and therefore in terms of the order the
